Is Facebook Paying Its Fair Share Of U.K. Taxes?

By David Cohen 

Facebook is catching some heat in the U.K. for allegedly not ponying up its fair share of taxes, and for doing so, in part, by locating its international headquarters in Dublin.

The Guardian cited figures provided by Facebook to U.K. executive agency Companies House in reporting that the social network’s British arm paid its 90 U.K.-based employees an average of £275,000 ($440,063) in 2011, while paying only £195,890 ($313,469) to the Treasury.

The newspaper added that Facebook reported 2011 U.K. revenues of £20.4 million ($32.64 million) to Companies House, far below analysts’ estimates of £175 million ($280.04 million), adding that reporting sales in Ireland results in lower corporation taxes.

And The Guardian reported that Facebook charged £15.4 million ($24.64 million) to its 2011 accounts as a cost of awarding share options to its U.K. staff, with the capability of using that money to reduce future tax bills. Tax Research UK’s Richard Murphy told the newspaper:

That appears to be £15.4 million to reward £20.4 million in sales. That makes no sense. The options must, of course, be based on the value of sales recorded in Ireland, but the U.K. is bearing the cost of the tax relief on paying these options.

When asked about locating Facebook locating its international headquarters in Dublin, a spokeswoman for the social network told The Guardian:

We have our international headquarters in Ireland that employs hundreds and a series of smaller local offices providing support services all over Europe. Dublin was selected as the best location to hire staff with the right skills to run a multilingual high-tech operation serving the whole of Europe.

According to The Guardian, Facebook’s U.K. accounts were audited by Ernst & Young, which would not comment.

Murphy concluded, as reported by The Guardian:

The U.K. is being taken for a ride. Facebook is taking standard practice for these IT companies to a new high, or low, depending on how you look at it. The U.K. is giving the tax break, and the Irish get benefit of all the tax on the sales.

Readers: Do you think this is a case of deceptive practices, or just shrewd accounting?

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